Chinese Factories Closed For Code Violations May Never Reopen

Chinese factories shutdown around October 1st in observance of The National Golden Week, a holiday implemented by the government of the People’s Republic of China to promote domestic tourism, allow workers to visit relatives in remote rural areas, and improve the country’s standard of living.

Though October’s Golden Week is cause for celebration and a welcome respite from work, many factory workers may not have a job to come back to by the week’s end.

As in the past, Chinese officials are providing very little clarification on regulations. This lack of explicit instructions leaves many mills to their own devices, putting them at risk of being shutdown at a moment’s notice. Even after factories are forced to close, there is little word on what they should do to make their operations compliant or how long they will have to remain closed. Supplies further complicate the issue as the agency has little control over material sources.

Efforts to curb pollution caused by industrial activities have already shuttered many mills in the Northern provinces of China, a trend that is soon expected to spread throughout the southern provinces.

Areas currently and soon-to-be impacted include the provinces of Jilin, Hebei, Shandong, Henan, Anhui, Jiangsu, Zhejiang, and Guangdong. Guangzhou in the southern province of Guangdong will likely see manufacturer audits in the fourth quarter and into 2018.

The Ministry’s efforts take aim at manufacturers of low-value commodities which generally generate excessive pollution, especially in light of China’s rapid, often uncontrolled, economic growth. Massive shutdowns and the lack of clear improvement strategies show the government is willing to allow these mills to move outside of China to India, Cambodia, Thailand, and Cambodia so that domestic production might focus on manufacturing goods higher up the value chain.

Factory audits will mostly focus on manufacturers of decorative home products, such as Christmas ornaments and other holiday decorations, and electronic components, such as circuit boards.

Chinese factory closures have brought a slump in Asia-Europe and trans-Pacific container trades – meaning cargo rates may increase if shippers can’t fill their containers. Though alternative manufacturing markets may be opening in other parts of Asia, it will still be difficult to match China’s well-established network of factories and suppliers.

If you generate, handle, or process recyclables and would like to strengthen your position in this uncertain market, please contact our industry veterans at Berg Mill Supply. As we have done in the past, Berg Mill continues to work hard on creating solutions to overcome fluctuating commodity markets, including opening markets in other countries, forging strategic alliances, and improving domestic processing capabilities.